Utah Governor Gary Herbert speaks during a debate against Peter Cooke on Friday, September 14, 2012. The governor is hoping a last-minute request to the president will give him the leeway to keep the state's current model of a mandated health insurance exchange. (Laura Seitz, Deseret News)

SALT LAKE CITY — Gov. Gary Herbert is hoping a last-minute request to the president will give him the leeway to keep the state's current model of a mandated health insurance exchange.

He sent a three-page letter to President Barack Obama Tuesday touting the "fully functional," "innovative" and "cost-cutting" Avenue H, which offers a choice of 140 health insurance plans to 7,646 individuals in 318 small businesses throughout Utah.

The current exchange and its ongoing enhancements, however, do not implement a full expansion of health insurance to all of Utah's uninsured, which is required under the Affordable Care Act if states desire to receive 100 percent of the federal funding needed to expand Medicaid coverage.

Herbert said in the letter that the exchange will expand to include even more businesses and individuals, but "we never intended for our exchange to administer Medicaid, enforce the individual mandate, or distribute federal tax cuts."

The current interpretation of the Affordable Care Act, Herbert wrote, "is to require states to take a more government-centric, standardized approach to exchanges. This results in less choice and more reliance on public programs."

Monday, U.S. Department of Health and Human Services Secretary Kathleen Sebelius responded to Herbert's previous requests for further clarification of health care reform requirements, saying states would not qualify for any federal funding without full expansion of Medicaid programs to include households with annual incomes below 133 percent of the Federal Poverty Level. She confirmed that states cannot partially expand their programs and get full federal funding over the three-year implementation period dictated by the law.

"Secretary Sebelius' decision gives Utah the clarity we've been looking for — it's all in, or all out," said Matt Slonaker, Utah Health Policy Project's medicaid policy and collaborations director. The local advocacy organization has been fighting for expanded access to include all of Utah's uninsured.

"This decision reminds us that we shouldn't let our hard-earned federal tax dollars go to other states that choose to expand," he said. "The feds are offering states a fantastic financial deal. It would be fiscally irresponsible not to take it."

He said Medicaid expansion, which has already met a lot of controversy in the state, "should be a top priority" in the 2013 legislative session.

State officials have until Friday to inform the federal government of its plan regarding a federal insurance exchange expansion to include Medicaid.

Sebelius said she has received numerous governors and other state leaders from across the country with questions about the new insurance marketplaces called exchanges. She encourages all states to "seriously consider establishing a state-based exchange, or running components of an exchange, but regardless of a state's decision, my department stands ready to help."

The law, Sebelius clarified, "allows your state to expand your Medicaid program and the federal government will pay 100 percent of the cost of all newly eligible residents in Medicaid for three years, beginning in 2014."

Herbert asked Obama to urge department approval of several requests to waive "restrictive" federal rules, and said Utah's plan could stand as a minimum federal standard and a model for other states.

"With that flexibility we will be free to do what we do best, innovate solutions that reduce costs, increase efficiency and improve quality," Herbert wrote.